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Student loan debt is a familiar problem for many Americans, as 42.8 million have federal loans totaling $1.693 trillion. With private student loans, the total student debt for Americans rises to $1.833 trillion.
According to the Education Data Initiative (1), the average person owes $39,547, while other borrowers have significantly more debt—and some even have to pick up pieces of debt left over after a parent dies.
Consider Priya, who went to an Ivy League college with her first year covered by scholarships and grants. For the next three years, her parents paid from their savings—or so she thought. Now, four years after graduation, Priya’s father has passed away. Her mother, who did not manage the family’s finances, received a notice in the mail that her father’s estate owed Priya $150,000 for her education.
Will Priya and her mother be responsible for paying this debt, or does the debt die with the father? Here’s what you need to know.
The first step is to understand that there are student loans for parents and student loans for students. This is true of both federal and private student loans.
When Priya’s father took loans, he could do so in his daughter’s name, which required her knowledge and consent. He may have borrowed money from the Department of Education as Parent Plus Loans (2) or as Parent Loans from a private student lender.
Parents who take these last two types of loans are solely responsible for them. So, Priya will not be directly liable for the loan, because the loans were not taken out in her name, and Priya did not sign for them.
However, this does not mean that the debt just disappears. Depending on the type of loans that Priya’s father took, the loan may go for good, or the lender may try to collect from her father’s assets, which will cause problems for Priya.
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When someone dies with a debt, usually the creditor cannot collect from surviving family members unless the family member:
* Were co-signers or co-borrowers for loans
* lives in community property, was married to the borrower and the law states that the surviving spouse is liable for debts incurred during the marriage (3)
However, creditors can try to collect from the assets or assets that the deceased person left behind.
This means that, hypothetically, if Priya’s father had $150,000 in a bank account at the time of his death, creditors could pursue the estate, claim and potentially collect the money they borrowed from her father’s bank account (which she may have inherited).
If there is no money in the estate, the lender will be out of luck.
However, if there are assets, they are usually up for grabs unless the deceased goes through the probate process to protect the assets from creditors during their lifetime for asset planning.
And while creditors can usually try to collect from the estate, that may not be the case here, depending on whether the parent took out private student loans or loans from the Department of Education.
The good news is that the Department of Education provides Parent Plus loans on the death of a parent or on the death of a student (4). So if Priya’s father took out federal loans, the government won’t come after the assets to recover the money.
But that’s not necessarily the case with private student loans. As Ernst explains, sometimes private lenders offer death leave. But in other cases, the creditor will try to recover the money from the deceased’s estate (5).
So, while Priya is not responsible for the debt in any way, the fate of her inheritance (or her mother’s inheritance – and current financial well-being) will depend on whether creditors decide to try to collect from the estate and what assets are left. In this case, Priya’s father’s individual creditor policy will determine what happens.
In any case, it may be possible for the court to order the payment of the debts. If this happens, Priya may try to help, despite the lack of legal obligation to refund the unpaid balance.
While Priya may be shying away from the perils of real estate, her question highlights the importance of understanding the contractual agreements you’re making when signing a student loan agreement.
With 10% of federal student loan borrowers and 1.62% of private student loan borrowers defaulting on their payments by the last quarter of 2025 (1), knowing the repayment rules can help you manage your debt, and potentially save you from negative consequences such as a low credit score.
If you find yourself struggling with debt—whether from student loans or consumer debt like high credit card balances, Liberty Debt Relief can help you negotiate a settlement with your creditors until all of your outstanding debt is resolved. Talk to a certified debt relief counselor for free today to find out how much you can save.
Repay your loan with just one monthly deposit for peace of mind and an easier time managing your budget.
Whether you are a parent of a student or a former student struggling with debt, the high cost of education can be a burden.
Recent data show that the average cost of tuition is $9,750 for in-state schools and $28,386 for out-of-state schools (6). If you have to borrow to cover these costs, you can consider using the equity in your home through a HELOC loan. This can help you pay off your student loan at a better rate than a traditional loan.
With Shape, the HELOC application process is fast, completely online, and transparent. You can check your rate in minutes, complete the entire application digitally, and receive funding in as little as five days. Unlike traditional HELOCs that allow you to borrow gradually, the figure gives you the full pre-approved amount.
Skip the personal appraisal process and long waits for written approvals and step into your home equity to take back control of your financial life.
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Education Information Innovation (1), (6); Federal Student Aid (2), 4; Consumer Tax (3); diligence (5)
This article provides information only and should not be used as advice. It is provided without warranty of any kind.
